Eli Manning's Firm Acquires Youth Sports Giant RCX Sports

Courtesy of RCX

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Former New York Giants quarterback Eli Manning's private equity firm Brand Velocity Group is acquiring RCX Sports, the company that manages the licenses of the official youth sports programs of the NFL, NBA, WNBA, MLS, NHL and MLB.

RCX has about 150 employees and makes money distributing sports products such as uniforms and equipment and servicing local parks and recreation centers. Financial terms of the deal weren't disclosed. The transaction is supported by a broad investor group including other former and current athlete partners Emmitt Smith, Larry Fitzgerald and Jameis Winston.

Parents of kids who play youth sports are likely quite familiar with the programs: NFL Flag; Jr. NBA; Jr. WNBA; MLS GO; NHL Street and MLB Pitch Hit & Run. NFL Flag is the largest youth sports league globally, involving about 1 million kids, according to RCX CEO Izell Reese.

The business of youth sports is well suited for private equity. It's supported by passionate customers, steady and reliable cash flows — every sports season comes with fresh fees — and it's decentralized.

This lack of cohesion has led to a myriad of mobile apps and websites used to keep track of games, pay league fees, order equipment and chat with coaches.

A standard private equity playbook is to roll up a variety of smaller leagues or apps, taking cost out by eliminating backend duplication and gaining scale via a series of acquisitions. This is starting to happen in youth sports. Josh Harris and David Blitzer, two of the most prominent private equity partners in the world, started Unrivaled Sports two years ago as their youth sports rollup investment vehicle.

Still, there's distrust among some powerful people that the industry would put the desires of consumers ahead of its own mandate to earn returns for stakeholders.

This has led to a group of Democratic congressmen to introduce a bill specifically to prevent private equity from investing in youth sports.

The "Let Kids Play Act" would ban private equity firms from investing in youth sports. U.S. Rep. Chris Deluzio of Pennsylvania and Sen. Chris Murphy of Connecticut unveiled the bicameral bill last month.

The congressional leaders said in a statement that youth sports was a $40 billion industry that's currently "dominated by private equity, with the singular goal of extracting as much profit as possible from families.

"As a hockey dad, I've seen how viciously these private equity companies rip families off," Murphy said in the statement.

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Manning said his private equity firm is different. BVG's interest in RCX is to bring more scale to their programs and increase inclusivity, he said.

"It's very much more access, keeping the prices low, and just growing this," Manning said. "The fact that you're working with the professional leagues, they don't want this to be a heavy cost to kids. They want more kids playing sports, being active, being out there. So our goal is to bring in capital so they can scale that, they can expand that."

Manning's reputation would likely help his point that not all private equity firms are the same. He's been a major champion of flag football, including assistant coaching his daughters' teams. His goal is to establish flag football as a high school varsity sport for both girls and boys, he said.

"That's what we're hoping [for], and we think that flag football doesn't have to just be a stepping stone into tackle," said Manning.

Sarah Stier | Getty Images

New Jersey last month became the 18th state to sanction girls' flag football as a high school sport. But getting flag football approved as a boys' sport may be trickier.

Coaches may not be pleased if star tackle football players opt to play flag instead.

Still, this could be mitigated by offering flag in a different season – for example, the spring – than tackle, which is played in the fall.

"Tackle is not year round, but flag is," said RCX's Reese. Reese is a former NFL safety, having played a total of seven seasons for the Dallas Cowboys, Buffalo Bills and Denver Broncos.

The multi-seasonality of flag football gives kids who also want to play tackle a way to "work on their football skills," said Reese, while also giving other kids the chance just to play flag.